Household debt of US$114 billion in UAE poses growing risk

Posted by Maggy Parries
on Jul 24th, 2013 and filed under Islamic Finance.
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Household debt poses a growing risk to the financial sector in the United Arab Emirates (UAE). As of June 2012, household debt totalled over US$114 billion, which translates to over US$95,000 in debt per household. 48% of UAE citizens have monthly loan repayment obligations that exceed their financial means. The UAE represents roughly 67% of the consumer debt in the GCC. One reason for the disparity is the difference in lending regulations. The positive news is that the banking sector in the UAE and GCC in general retains a high degree of liquidity. In conclusion, household debt remains an issue of concern in the UAE, and government policy should be directed towards the causes rather than the symptoms. Issuing debt relief must be coupled with stricter regulations on household lending, so that excessive lending and defaults can be prevented.